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Finland hunts for a new salary model

| Text: Carl-Gustav Lindén

Finland’s social partners are desperately looking for a new negotiation model. Or rather: the trade unions are trying their hardest to convince employers that a 40 year old labour market institution is still relevant.

For decades they have reached comprehensive income policy agreements negotiated by the large, central trade unions and the Confederation of Finnish Industries in cooperation with state representatives. The model is similar to the one previously found but long since abandoned in other Nordic countries.

In 2007 the employers were reluctant to carry on the tradition and since then there has been a debate about what new rules should apply for the labour market.  

The parties cannot agree. The Confederation of Finnish Industries, EK, has offered the trade unions a solution which would see the export industry negotiate a moderate wage agreement with their trade union counterparts. Then the three main trade union confederations, the Central Organisation of Finnish Trade Unions (FFC), The Finnish Confederation of Professionals (FTFC) and the Confederation of Unions for Professional and Managerial Staff in Finland (Akava) would recommend their members to stay within that agreement’s framework. In the spring of 2012, when all trade unions have entered into agreements, the government will come in and support employees by lowering income tax.

Sate support

Prime Minister Jyrki Katainen (the National Coalition Party) and Minister of Finance Jutta Urpilainen (the Social Democratic Party) have agreed to support a moderate wage agreement with tax cuts for both employees and employers. The latest wage negotiations have resulted in wages for public sector workers which are higher than those in the private sector. At the same time the number of illegal strike actions has increased, particularly within strategic sectors like logistics - i.e. transport and docks. 

Finnish business has adopted this model from Sweden. The trade union confederations have reacted negatively to put it mildly. They suspect employers are not only aiming for the smallest possible wage increases but that they also want to challenge the close relationship between the Social Democratic Party and the FFC. The unions also have a range of working life issues apart from wages which they want to find solutions to through central negotiations.

Saved Finland

The history of three-party cooperation stretches back to 1968 when the first comprehensive agreement was reached, yet the ground for it all was prepared as early as in the 1950s. 

Union representatives as well as the Social Democratic Party (SDP) and the Left Alliance now want to point out that these agreements saved Finland from the economic crisis of the early 1990s. In light of the dark clouds on the horizon, employers should be interested in better cooperation this time too. But their arguments don’t bite, despite the attempts by the Prime Minister to market something he calls an employment pact. 

The pressure on employers, to whom the Prime Minister does listen, is also  increasing because the Minister of Labour Lauri Ihalainen (SDP) is a former leader of the FFC.

The negotiations between the Federation of Finnish Technology Industries, which represents export businesses l ike Nokia, and the Finnish Metalworkers’ Union are ongoing. The Metalworkers’ Union wants a pay increase of around four percent, which in light of current problems could be seen as optimistic. Meanwhile workshops have plenty of orders on their books and employment is good, which is reflected in growing use of overtime.

Remote possibility

The current collective agreement runs out at the end of September. Everyone is waiting for the results of the current negotiations. If they fail it is quite possible that the Confederation of Finnish Industries will be forced to back down and take their seat at the negotiating table with the state and the trade union confederations.

Right now this feels like a remote possibility in light of the employers’ tough resistance. 

Government ministers have already shown the negotiators the way by taking 5 percent pay cuts themselves. This symbolic gesture hardly impressed union negotiators who for the first time since the beginning of the 2000s are forced to fight while faced with the fact that real wages have started falling in Finland. They had been the fastest rising real wages in the whole of the OECD region during the last decade, along with those in Norway and Cyprus. 

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